Military Construction: Renovation Plans at the Portsmouth Naval Medical
Center (Letter Report, 06/12/97, GAO/NSIAD-97-144).

GAO reviewed the Department of Defense's (DOD) plans to renovate
building 215 at the Portsmouth Naval Medical Center in Portsmouth, VA,
focusing on whether: (1) the actual workload at Portsmouth affects its
requirements facility space; (2) the planned occupants of the bottom six
floors of building 215 could move into the replacement hospital; and (3)
alternative uses exist for the top floors in building 215.

GAO noted that: (1) the assumptions used to design and size the
Portsmouth Naval Medical Center have not materialized as expected; (2)
in some instances, the actual workload today is significantly less than
anticipated; (3) all indicators of inpatient workload are over 50
percent lower than the figures that were used to size the facility
space; (4) reported outpatient visits nearly doubled; (5) theoretically,
such overstated inpatient requirements might result in excess space that
could be used for other purposes, such as accommodating functions
planned for building 215; (6) reusing inpatient space for other purposes
would not be practical because the new hospital is nearly complete and
costs to redesign and rebuild it could be significant; (7) in 1995,
project officials authorized the redesign and finishing of about 38,000
square feet of space for $4 million, or about $105 per square foot; (8)
in addition, the usability of space in the new hospital is severely
constrained; (9) inpatient beds are distributed throughout the hospital
according to medical function, so that maternity beds are located near
the nursery and intensive care beds are located near the operating
rooms; (10) although inpatient workload has decreased by 50 percent, the
distribution of this decrease across various medical functions is not
even and could result in only small numbers of beds being eliminated
from each function; (11) GAO's analysis indicates that fully renovating
building 215 is a practical option because some renovation of that
building is unavoidable; and (12) Portsmouth officials have identified
tenants to fully occupy the top floors, which they estimate will offset
about $1.6 million in annual costs to lease space and may avoid $10
million to renovate other substandard space.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-97-144
     TITLE:  Military Construction: Renovation Plans at the Portsmouth 
             Naval Medical Center
      DATE:  06/12/97
   SUBJECT:  Military facility construction
             Military hospitals
             Cost effectiveness analysis
             Projections
             Construction costs
             Military cost control
             Hospital care services
             Health resources utilization
             Patient care services
             Hospital planning
IDENTIFIER:  Defense Health Program
             DOD Quadrennial Defense Review
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to Congressional Requesters

June 1997

MILITARY CONSTRUCTION - RENOVATION
PLANS AT THE PORTSMOUTH NAVAL
MEDICAL CENTER

GAO/NSIAD-97-144

Portsmouth Naval Medical Center

(703184)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense

Letter
=============================================================== LETTER


B-276792

June 12, 1997

The Honorable Conrad Burns
Chairman
The Honorable Patty Murray
Ranking Minority Member
Subcommittee on Military Construction
Committee on Appropriations
United States Senate

As you requested, we are providing information on the Department of
Defense's (DOD) plans to renovate building 215 at the Portsmouth
Naval Medical Center in Portsmouth, Virginia.  Building 215 has 18
stories and is currently an operating hospital.  A replacement
hospital, under construction adjacent to building 215, is expected to
be occupied in July 1998.  As part of this construction project, DOD
received funding to renovate portions of the first six floors in
building 215 (about 40 percent of the building's total space) for a
range of health care and medical support services.  DOD intends to
request additional funds to renovate the remaining floors.  Without
the additional funds, these floors may be unoccupied in the future. 
This report addresses whether (1) the actual workload at Portsmouth
affects its requirements for facility space, (2) the planned
occupants of the bottom six floors of building 215 could move into
the replacement hospital, and (3) alternative uses exist for the top
floors in building 215. 


   BACKGROUND
------------------------------------------------------------ Letter :1

The Portsmouth Naval Medical Center is a teaching hospital that
provides comprehensive health care services to active duty forces
and, when space is available, provides medical services to other DOD
beneficiaries (i.e., dependents of active duty members and retirees
and their dependents) in the Norfolk, Virginia, area.  When space is
not available, beneficiaries receive health care in civilian
hospitals and clinics under DOD health plans.  Currently, Portsmouth
provides medical care primarily in two hospitals (building 1 and
building 215) and seven outpatient clinics located throughout the
Norfolk area.  The two buildings have a total of 348 inpatient beds
and about 700,000 gross square feet of facility space.  Building 1 is
used primarily for psychiatric, pediatric, and obstetrics and
gynecological services.  Building 215 contains about 500,000 gross
square feet of space on floors 1 through 15; floors 16 through 18 are
mechanical support spaces and therefore are not available for
occupancy.  Building 215 is currently used to provide a range of
inpatient and outpatient services.  Appendix I shows the Portsmouth
Naval Medical Center, as of August 1996. 

To modernize the Center's medical facilities and correct numerous
safety code violations, the Congress authorized DOD, in the National
Defense Authorization Act for Fiscal Years 1990 and 1991 (P.L. 
101-189), to spend $330 million to construct and renovate 1.5 million
square feet of space.  This project includes construction of a new
hospital with 464 inpatient beds (approximately $141.8 million);
renovation of building 1 for administrative purposes (approximately
$12.1 million); renovation of
40 percent of building 215--portions of floors 1 through 6--to
provide clinical health care and medical support (approximately $12.5
million); and construction of a new parking garage, gymnasium, and
central energy plant.  According to Portsmouth officials, the project
was about 90 percent complete as of February 1997, and the remaining
work is expected to be finished by January 2001. 

The Navy had also planned to spend about $19 million to renovate the
top floors of building 215 under a separate project that would
convert about half of the space to housing for unaccompanied enlisted
servicemembers, that is, those without spouses or dependents.  In
1994, the Navy canceled these plans and decided to use the space for
additional medical and administrative functions.\1 The prospective
tenants for this additional space include medical and support
personnel who currently occupy leased space in the Norfolk area and
space at the Center that the Navy has determined is substandard. 
Navy officials estimate that $34.6 million will be required to
renovate about 300,000 square feet of additional space in building
215. 

Partially because of concerns that the additional renovation may not
be needed, the DOD Comptroller deferred the funding request for this
project from fiscal year 1998 to 1999, pending further analysis and
validation of need.  In January 1997, the Office of the Assistant
Secretary of Defense for Health Affairs contracted for a study of
total workload and space requirements for Portsmouth.  A final report
on the study's findings is expected in June 1997. 


--------------------
\1 The Navy requested and the Congress funded two additional military
construction projects totaling $16.1 million to provide housing for
unaccompanied servicemembers. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The assumptions used to design and size the Portsmouth Naval Medical
Center have not materialized as expected.  In some instances, the
actual workload today is significantly less than anticipated.  All
indicators of inpatient workload are over 50 percent lower than the
figures that were used to size the facility space.  Reported
outpatient visits nearly doubled.  Theoretically, such overstated
inpatient requirements might result in excess space that could be
used for other purposes, such as accommodating functions planned for
building 215. 

Reusing inpatient space for other purposes would not be practical
because the new hospital is nearly complete and costs to redesign and
rebuild it could be significant.  In 1995, project officials
authorized the redesign and finishing of about 38,000 square feet of
space for $4 million, or about $105 per square foot.  In addition,
the functional use of space in the new hospital is severely
constrained.  Inpatient beds are distributed throughout the hospital
according to medical function, so that maternity beds are located
near the nursery and intensive care beds are located near the
operating rooms.  Although inpatient workload has decreased by over
50 percent, the distribution of this decrease across various medical
functions is not even and could result in only small numbers of beds
being eliminated from each function. 

Our analysis indicates that fully renovating building 215 is a
practical option because some renovation of that building is
unavoidable.  Portsmouth officials have identified tenants to fully
occupy the top floors, which they estimate will offset about $1.6
million in annual costs to lease space and may avoid $10 million to
renovate other substandard space. 


   ORIGINAL WORKLOAD ASSUMPTIONS
   HAVE CHANGED
------------------------------------------------------------ Letter :3

DOD designs its hospitals based on assumptions about the beneficiary
population to be served, expected inpatient and outpatient workloads,
and staff needed to provide medical care.  However, several
assumptions made by DOD that were used to support the modernization
project at Portsmouth Naval Medical Center have not materialized as
expected.  For example, DOD estimated in 1988 that a modernized
center would serve a beneficiary population of about 306,000 people
in 1994--when the hospital was initially planned to open.  At that
time, about 35 percent of the beneficiaries were expected to be
active duty personnel.  Due to military downsizing and other factors,
DOD now projects that the hospital, when it opens in 1998, will serve
about 302,500 beneficiaries, of which about 30 percent will be active
duty members. 

Also, significant changes over the past few years in health care
delivery practices, such as the shift from inpatient to outpatient
care, have affected facility use and size.  As table 1 shows, all
indicators of inpatient workload are significantly lower than the
original projections used in Portsmouth's design. 



                                     Table 1
                     
                     Projected and Actual Inpatient Workload
                      at the Portsmouth Naval Medical Center


                                                                         Percent
                                                                          change
               Projected                                               projected
                workload                                                    1994
Inpatient         for FY                                              and actual
indicator           1994    FY 1994       FY 1995       FY 1996             1996
------------  ----------  ------------  ------------  ------------  ------------
Number of        158,540     78,100        77,769        75,723              -52
 days
 available
 beds are
 occupied
Average              393      214           213           194                -51
 number of
 patients
 each day
Average              5.7      3.3           3.2           2.8                -51
 length of
 stay (in
 days)
--------------------------------------------------------------------------------
Source:  Naval Medical Center, Portsmouth and Defense Medical
Facilities Office, IBM Mainframe Biometrics Files (as of Feb.  1997). 

In contrast to the decline in inpatient workload, reported outpatient
visits doubled from 425,000 in 1988 to nearly 900,000 in 1996.  Some
of the increase can be attributed to medical functions currently
performed at Portsmouth that were not included in the 1988 data,
including pediatrics, family practice, and dermatology services. 
Some of the increase may be caused by changes in the way the data is
collected and reported.  For example, telephone calls that providers
make to patients in their homes were not included in the design
assumptions, but these calls have been included in outpatient
workload since 1995.  However, available data did not distinguish
telephone calls from actual outpatient visits, and hospital officials
could not estimate the number of calls. 

Another important assumption used to estimate facility size is the
number of health care providers (i.e., the number of physicians and
other providers who examine patients, such as nurse practitioners,
physician assistants, and independent medics).  According to current
DOD medical standards, each practicing physician or provider should
have a 100-square foot office plus two 100-square foot examination
rooms.  The Navy originally assumed that Portsmouth would have 471
physicians when the new hospital opens.  In 1996, however, 455
providers were assigned to the facility, and the Navy projects that
530 providers will be assigned in fiscal year 1998. 

One additional assumption that may not materialize is the size of the
graduate medical education program.  The original design projections
increased the total square footage of the Portsmouth facility by
nearly one-third in part to accommodate the facility's graduate
medical education programs.  However, in February 1997, the Navy
Surgeon General announced plans to eliminate 7 of Portsmouth's 12
graduate medical education programs.  If these plans are implemented
over the next 5 years, 87 physician training positions, or 20 percent
of the total health care providers, will be cut.  Portsmouth
officials told us these changes will not affect the demand for
medical care.  Therefore, these officials have requested the Navy
Surgeon General to provide additional physicians to handle the
workload, but a final decision is on hold. 

Determining the exact square footage requirements for any major
medical center is not a precise calculation but is instead based on
subjective decisions by the designers and facility managers.  For
DOD, this process is further complicated because of its dual mission
to prepare active duty members for military operations and ensure the
availability of peacetime health care for other beneficiaries.  The
teaching mission at Portsmouth also adds other considerations into
decisions about facility space. 

In addition, the Office of the Assistant Secretary of Defense for
Health Affairs contracted for a revalidation study of the workload
and space requirements at Portsmouth in January 1997.  For these
reasons, we did not make definitive conclusions about the impact of
workload changes on the need for additional space in building 215. 
However, to gauge the correlation between total workload and facility
space, we compared the Portsmouth facility with DOD's nine other
medical centers.  This analysis shows that Portsmouth compares
favorably with other centers in the indicators that determine
facility space.  For fiscal year 1995, the last year complete data
were available, Portsmouth served the largest DOD beneficiary
population and was the second largest facility.  Compared with the
nine other facilities, Portsmouth ranked third in the number of
outpatient visits, sixth in the number of days inpatient beds were
occupied, and seventh in the number of beds. 


   SOME RENOVATION OF BUILDING 215
   IS UNAVOIDABLE
------------------------------------------------------------ Letter :4

In addition to our review, two prior DOD studies identified a
decrease in Portsmouth's inpatient workload that could result in some
excess space in the new hospital being used for other purposes. 
However, potential reuse of this space is not practical at this point
in the project because the new hospital is nearly complete. 
Therefore, a portion of building 215 must be renovated to accommodate
the patient care functions that cannot be relocated to the new
hospital. 

In a 1993 audit, the DOD Inspector General raised questions about
excess capacity in the proposed new hospital and recommended a
complete redesign of the project.\2 In 1992, Health Affairs
identified a one-third decline in inpatient care and recommended that
the facility be redesigned.\3 The Navy and DOD reached a compromise
solution that reduced the number of inpatient beds by 101 but did not
affect the size of the facility.  The rationale for this compromise
was that redesign of the space would delay the project several years
and increase costs.  At the time, the Navy estimated redesign costs
to be $11 million, and facility construction had not begun. 

This situation is worse now because construction of the new facility
is nearly 85 percent complete.  The new hospital is designed in
distinct sections, called pods, by facility engineers.  Related
medical functions are collocated in various pods to improve health
care delivery.  For example, the maternity space is located near the
delivery rooms, nursery, and neonatal intensive care unit. 
Similarly, the intensive care and the coronary care units are located
near the operating rooms.  This dispersion of inpatient space does
not allow easy reuse of portions of the space that is commensurate
with a 50-percent decline in aggregate inpatient workload because the
decline is not concentrated in one medical specialty, which would
allow redesign of only one section of the hospital. 

According to facility engineers, the inpatient space is not modular
construction and cannot be easily changed.  A Navy official said that
the costs to redesign the space could range from 10 to 12 percent of
the costs to make the physical change, but this official could not
provide a definite estimate without having specific parameters for a
change.  However, a recent change in the new hospital that moved some
obstetrics functions, occupying about 38,000 square feet of space,
from one floor to another cost $4 million, or about $105 per square
foot. 


--------------------
\2 Medical Facility Requirements--Naval Hospital Portsmouth, Va., DOD
Office of the Inspector General, Report No.  93-160, September 2,
1993. 

\3 Naval Hospital Portsmouth, Va., Revalidation of Requirement,
Office of the Assistant Secretary of Defense for Health Affairs,
August 13, 1992. 


   OTHER ALTERNATIVES ARE NOT
   FEASIBLE AND COST-EFFECTIVE
------------------------------------------------------------ Letter :5

Alternatives that we examined to use the additional space in a
renovated building 215 are not feasible and cost-effective.  One
alternative would be to limit the renovations to those necessary to
correct known building code violations, such as a lack of adequate
fire protection and removal of life-threatening asbestos.  Portsmouth
officials estimated this option would cost about $19 million in
construction funds, or $15 million less than the current proposal. 
In a 1995 economic analysis, DOD concluded that the net present value
of life-cycle costs, over a 30-year period, for the full renovation
would be less than comparable costs of a safety upgrade.\4 This
conclusion was reached because the upgrade option does not include
any improvements to the heating and ventilation system, which is very
inefficient.  Portsmouth officials estimate that about $1.2 million
each year is wasted in energy costs because of the inefficient
heating system.  Also, the interior space, which is currently
designed for inpatient hospital care, will not be modified into more
efficient space.  Without these changes, Portsmouth officials
estimate that about $1.6 million will be incurred each year to
provide space for staff that cannot move into the building. 

We performed a net present-value analysis and also concluded that a
full renovation is more cost-effective over a 30-year period.  Like
the DOD analysis, we included the additional costs of the inefficient
heating system.  We also considered costs that are required to
provide space for prospective tenants of building 215, as described
below. 

  According to Navy data, the life safety upgrades would not provide
     as much useful space as a full renovation because the interior
     building design would not be reconfigured.  According to
     Portsmouth officials, building 215 has an unusual floor
     configuration that limits efficient use.  Without a full
     renovation, Portsmouth officials estimate that the building will
     have
     25 percent less usable floor space, which will not accommodate
     several functions currently located in leased space in
     surrounding areas.  For example, the Naval Environmental Health
     Center and the administrators for DOD's new managed health care
     program currently lease about
     43,000 square feet of space at an annual cost of nearly $800,000
     each year.  By consolidating these and other off-site functions
     into 120,450 square feet of renovated space in building 215, the
     Navy can avoid paying about $1.6 million per year in lease costs
     and maintenance expenses at other locations. 

  Fully renovating building 215 will allow Portsmouth officials to
     relocate personnel from substandard on-site space at the Center
     and avoid the cost of renovating this space.  Although
     Portsmouth officials have not done a thorough evaluation, they
     estimate that renovating this space to an acceptable level would
     cost nearly $6 million.  These officials also estimate that they
     would have to spend another $4 million to renovate some of the
     off-site space.  The total costs are estimated to be
     approximately $10 million.  We did not independently validate
     these costs; however, our review of recent renovations on the
     sixth floor of building 215 indicates that these estimates
     appear reasonable. 

Another option involved relocating the administrative office space
from building 1 to building 215.  This option could avoid $11 million
in renovation costs for building 1.  However, the option is not
feasible because building 1 is on the National Registry of Historic
Landmarks and must be maintained in a manner that considers
preservation of its historical integrity.  Although the National
Historic Preservation Act
(16 U.S.C.  470h-2) allows some exceptions, Portsmouth and DOD
officials support the historical restoration of this building and
have not sought exceptions.  Also, relocating personnel from building
1 to building 215 would leave other personnel in substandard on-site
facility space or require Portsmouth to renovate other facilities. 

An additional option would be to discontine using the building or to
use only portions of it.  However, Portsmouth and DOD officials
believe building 215 is a valuable asset that should be used, and
thus do not believe that total abandonment of the building or a
partial renovation is reasonable.  The officials are concerned that a
vacant building 215 would eventually deteriorate and become a safety
hazard to the Medical Center.  A DOD official estimated that it would
cost between $15 million and $20 million to raze the structure
because of environmental controls needed to protect against asbestos
contamination.  In addition, the Navy has invested over $7 million to
design a full renovation of building 215, build connecting bridges to
the new hospital and parking garage, and renovate some of the
clinical space on the sixth floor, and this investment would be lost. 
As with the situation concerning the historical builing, total
abandonment would leave some support personnel in substandard space
that the Navy would have to renovate. 

Regarding a partial renovation, Portsmouth officials would not
estimate how much it might cost to seal the upper floors because the
officials do not believe that this option is viable.  They told us
that the asbestos must be removed from the entire building.  In a
prior study, asbestos removal was estimated to cost about $11
million.  Although fewer initial funds would be invested, our
economic analysis indicated that sealing the building would not be
cost-effective over a 30-year life cycle. 

DOD and Portsmouth officials involved with this project believe it
has progressed to the point at which the only feasible option is to
finish it as planned, although they acknowledge that, if they were
designing this facility today, they would do some things differently. 
Project officials have expressed concerns that delaying the $34.6
million until fiscal year 1999, as currently required by the DOD
Comptroller, would cause DOD to incur unnecessary costs, such as $1.6
million per year in lease costs and $1.2 million in wasted energy
costs.  An official from the DOD Comptroller's Office maintains that
the most appropriate time frame to fund this project is fiscal year
1999.  This official said the 1998 funding request was not delayed
solely because of concerns about facility size and the need for a
revalidation.  The decision was also based on an analysis of the
project's spending patterns.  The official said the 1999 budget
request would recognize potential additional inflation costs.  DOD
officials told us that building 215 will be completely designed and
ready to renovate in October 1997. 

In addition, two assessments of the Defense Health Program, which
could impact Portsmouth, are still underway.  In August 1995, the
Deputy Secretary of Defense directed DOD to reexamine its wartime
medical personnel requirements.  An original study concluded that 50
percent of active duty physicians were in excess of the minimum
number needed to meet essential wartime medical demands.  If the
reexamination reaches similar conclusions, personnel assigned to all
DOD hospitals, including Portsmouth, could be significantly impacted. 
The first of three phases of this wartime medical requirements study
is expected to be completed this year. 

Also, the May 1997 Report of the Quadrennial Defense Review
identifies several DOD initiatives to reduce defense infrastructure
personnel and costs, including outsourcing selected patient care,
medical training, and installation support in the Defense Health
Program.  In addition, the Secretary of Defense commissioned a Task
Force on Defense Reform to further examine the Office of the
Secretary of Defense and other defense agencies.  This panel will
review the history, missions, resources, operations, and requirements
of these organizations to reengineer the way they operate.  The panel
is expected to report its findings by November 1997. 


--------------------
\4 Naval Medical Center Portsmouth, Va., A Revalidation Assessment,
$33 Million Alteration and Life Safety Upgrade, Building 215, Office
of the Assistant Secretary of Defense for Health Affairs, May 1995. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

In commenting on a draft of this report, DOD generally concurred with
our findings (see app.  II).  DOD officials described some of the
findings from their 1997 revalidation efforts, which also concluded
that a full renovation of building 215 is more cost-effective than
other alternatives.  DOD officials believe that we implied that the
project was not planned properly because we did not state in the
results in brief section that dramatic changes in the U.S. 
healthcare delivery caused the assumptions used for the Portsmouth
facility to not materialize. 

We believe we have appropriately discussed in the body of the report
that a shift from inpatient to outpatient care has occurred. 
However, this changing trend was acknowledged as early as 1983 in an
economic analysis prepared for DOD that served as the starting point
for the renovation of the Medical Center.  At that time, the
consultants who assessed the medical care demands at Portsmouth
recommended that DOD build a new outpatient clinic and renovate the
existing hospital for inpatient care rather than construct a new
inpatient hospital.  We did not pursue these issues in this report
because we believe the project is too far along in the construction
cycle to cost-effectively redesign the inpatient space in the new
hospital to accommodate a significant increase in outpatient workload
or other functions. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

To identify workload changes, we gathered information on the
inpatient and outpatient workload projections in the Navy's 1988
economic analysis for the Portsmouth project and the most recent
workload data available.  We compared projections for fiscal year
1994 with actual data for fiscal years 1994 through 1996 in the
following areas:  (1) total inpatient and outpatient workload, (2)
beneficiary population by category of beneficiary, and (3) staffing
by category of provider.  We also compared workload and space
requirements from the economic analysis with the 1990 program design
and the 1996 actual space layout to identify potential excess space
resulting from changes in workload.  Further, we assessed the
consistency of Portsmouth's workload and other characteristics by
comparing the data with similar data from the other nine military
medical centers. 

To identify potential opportunities to consolidate clinical space in
the new hospital, we reviewed all prior assessments of the project. 
We also compared the suggested changes from these studies with the
actual actions taken.  We compared relevant costs of possible
alternative uses for the additional space in building 215 with their
potential benefits to assess the cost-effectiveness of each
alternative.  In making these comparisons, we relied on the estimates
provided by DOD and Portsmouth officials.  We did not independently
verify the cost estimates; however, we compared the actual costs of
recent renovations with the estimates to assess their reasonableness. 
To consider the time value of money for the different alternatives,
we performed a net present-value analysis.  In doing so, we
considered both the costs and savings of the different alternatives. 
We assumed that renovations funded by military construction funds
would be accomplished over a 2-year period and that renovations
funded through the operation and maintenance appropriation would be
funded at $1 million per year. 

We interviewed responsible agency personnel and reviewed applicable
policies, procedures, and documents at the Portsmouth Naval Medical
Center, Portsmouth, Virginia; Atlantic Division, Naval Facilities
Engineering Command, Norfolk, Virginia; Office of the Assistant
Secretary of Defense for Health Affairs, Arlington, Virginia; Defense
Medical Facilities Office, Falls Church, Virginia; and Navy Bureau of
Medicine and Surgery, Washington, D.C. 

We performed our review between October 1996 and March 1997 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to the Secretaries of Defense
and the Navy and the Director of the Office of Management and Budget. 
Copies will also be made available to others on request. 

Please contact me on (202) 512-5140 if you or your staff have any
questions concerning this letter.  Major contributors to this report
are listed in appendix III. 

Mark E.  Gebicke
Director, Military Operations
 and Capabilities Issues


THE PORTSMOUTH NAVAL MEDICAL
CENTER AS OF AUGUST 1996
=========================================================== Appendix I



   (See figure in printed
   edition.)

   Source:  Portsmouth Naval
   Medical Center.

   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
=========================================================== Appendix I


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
------------------------------------------------------- Appendix III:1

Sharon A.  Cekala
Valeria G.  Gist
Charles W.  Perdue


   NORFOLK FIELD OFFICE
------------------------------------------------------- Appendix III:2

Robert C.  Mandigo, Jr.
Raul S.  Cajulis
Patricia F.  Blowe


   OFFICE OF THE GENERAL COUNSEL
------------------------------------------------------- Appendix III:3

Richard Seldin


*** End of document. ***